NLRB vacates joint employer ruling, reverting to broader standard

Last week the National Labor Relations Board vacated its 2017 decision in Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co. regarding joint employer regulations, thus reverting to an earlier ruling with broader definitions. Some business associations, including the American Hospitality and Lodging Association, say this leaves some hotels and other businesses open to being defined as joint employers.

THE NATIONAL LABOR Relations Board has vacated a previous decision on joint employer regulations, leaving hotels and other businesses with much broader definitions of when they may be liable for benefits for employees provided by outside agencies. The ruling has led a coalition of business associations, including the American Hospitality and Lodging Association, to renew its call on Congress to pass legislation to better define joint employers.

On Feb. 26, the NLRB vacated its 2017 decision in Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co. in response to a court finding that one of the board members had a conflict of interest in that case. As a result, the board’s definition on joint employers under the National Labor Relations Act and the Fair Labor Standards Act reverts to the 2015 Browning-Ferris Industries case, which the Hy-Brand decision had overruled.

The Browning-Ferris ruling provides much broader definitions of who qualifies as a joint employer, and that is cause for concern for the Coalition to Save Local Businesses, which includes AHLA as well as the International Franchise Association, National Restaurant Association and the U.S. Chamber of Commerce. The week before NLRB vacated the Hy-Brand ruling, CSLB members sent a letter to U.S. Senate leaders Mitch McConnell and Charles Schumer to consider the “Save Local Business Act,” which has already passed the House.

“The undersigned associations representing millions of job creators in every industry and sector of our nation’s economy urge the U.S. Senate to address the growing confusion and harm to our economy caused by the lack of legislative definitions for ‘joint employer’ in the NLRA and the FLSA,” the letter said. “Under the FLSA, there are currently as many as eight different federal circuit court definitions for joint employment. Complicating the matter, the U.S. Supreme Court recently declined to hear a case that would have addressed this issue, thus eliminating the possibility of a judicial solution. Without a unified national definition, businesses operating in multiple federal circuits will face varying interpretations of what it means to be a joint employer under the FLSA.”

Last week’s decision by the NLRB “raises the level of urgency” for the Senate to act, said International Franchise Association Senior Vice President of Government Relations and Public Affairs Matt Haller in a statement. “We are hopeful Senators can step into the breach created by today’s decision and exercise their right to codify a definition of joint employer for small business owners everywhere and end the constant ping-ponging back and forth of this issue.”

AAHOA also has been advocating for passage of the Save Local Business Act and AAHOA President and CEO Chip Rogers also said in a statement NLRB’s ruling last week emphasizes the need for the law.

“The NLRB’s decision to revert to the unclear Browning-Ferris joint employer standard represents an appalling return to the uncertainty that stagnated job growth in franchised hotels and is yet another reminder of the job-killing effect of arbitrary regulatory overreach by unelected bureaucrats,” Rogers said.

Under Browning-Ferris, the NLRB can find two or more companies to be joint employers if they both determine essential terms and conditions of employment of a single work force, said an article in in The National Law Review with several attorney authors. “Under Browning-Ferris, the primary inquiry is whether the purported joint employer possesses the actual or potential authority to exercise control over the primary employer’s employees, regardless of whether the company has in fact exercised such authority,” the article said. “This standard is viewed as employee and union-friendly, and led to the issuance of complaints alleging joint employer status in an increased number of circumstances.”

The article recommends that employers with matters before the NLRB regarding joint employer issues focus on standards set by both Browning-Ferris and Hy-Brand cases to prepare for the possibility that the board adopts a test of joint employer relationships that is more rigorous than Browning –Ferris.

The Senate also is expected to vote next week on President Trump’s nominee to fill a vacated seat on the NLRB, business attorney John Ring, and he is expected to be approved, according to the Washington Examiner. Once that is done, the authors of the National Law Review article expect the board to reinstate the standards set by Hy-Brand.